TNAG-0870-FCO40-1080-Air-services-between-Hong-Kong-and-the-UK-1979 — Page 7

DRAFT

CONFIDENTIAL

PRIORITY HONG KONG

RFI

(for ROBERTS)

Your telno 1388: air services on London-Hong Kong route.

1 We do not think that the position of the applicants before

the CAA is as unfavourable as you suggest. We have already

acknowledged that section 3(1) of the Act favours British airline

as defined and not Hong Kong-based airlines and we have nothing

to add to paragraph 4 of our telno 672. We suggest however that

your anxiety about greater quote legislative prejudice unquote

is not well-founded because We question the validity of linking

the Guidance (Cmnd 6400) with that Section of the Act, for the

following reasons:

nevertheles

A The Court of Appeal in its decision in the Laker

case declared that paragraph 7 of the Guidance and

the proviso to paragraph 8(b) were ultra vives.

Accordingly no question of British Airways' consent

arises.

B We stand by our previous comment (para 3 of our

telno 672) that the CAA does have discretion in the

way it applies the sphere of interest policy:

it is clear from the decision of the Court of Appeal

that the Guidance cannot be mandatory in effect.

While the CAA supports the generality of the policy,

it has exercised discretion in applying it in some

cases. An example is their giving a licence to BCAL

to serve Dallas/Forth Worth.

1

We have

never

clared that CAA is

6400) a to

legally entitled to

pohl

meas it in